when Art meets Science in valuing Manhattan residential loft space, Art wins (a lot)
Unless you are brand new to Manhattan Loft Guy, you know that all roads through discussions of the value of terraces, roof decks and balconies of Manhattan lofts lead through The Miller. Specifically, his rubric that the starting point for calculations is that outdoor space is generally worth about 25% to 50% of indoor space depending, always depending, etc, etc…. So my assumption on noting that the “2,257 sq ft” Manhattan loft #2F at 73 Worth Street on a very busy edge of Tribeca just sold for $3.35mm ($1,484/ft, unadjusted) is that this particular terrace would be at the low end of the valuation range. After all, the floor plan shows that the “230 sq ft” terrace at the back of the loft is accessible only from the second bedroom and this photo tells you that this is among the least private of private outdoor spaces you are going to see:
For crying out loud, if the baby’s sleeping in the second bedroom, guests are going to have to tip-toe through the room to get on and off the terrace, food and drink must be carried that long way from the kitchen to the terrace, any sound that you make on the terrace is going to reverberate between the towering walls that make up this canyon, and anyone curious about your guests or the quality of your entertaining will look down on your terrace to critique you. Oh, and the terrace likely adds no view and no light beyond the little of each available from the interior of the loft. (For an even better sense of what an urban canyon this terrace bottoms out in, click the View On Google button on the StreetEasy listing page; you may have to zoom a bit for the full effect, but you’ll see that the terrace is, in fact, surrounded by taller buildings even on the side behind the photographer. Can you say echo, echo, echo …?) In sum, the (so-called) Science of Manhattan real estate valuation as described by Professor Miller (holder of an endowed chair in the Real Estate Industrial Complex, Manhattan Residential Real Estate Division) requires that this terrace in this loft fall at the lower end of any normal range.
You can see where this is going, right?
truth is stranger than Science
As The Miller tells us, we start with trying to comp the interior space in the building, in order to isolate the value of any private outdoor space. The best comp happens to be the “2,565 sq ft” loft #2B that sold for $3.6mm ($1,403/ft) in March rather than the more recent “1,859 sq ft” loft #5D that sold in May at $2.8mm ($1,506/ft, unadjusted) because the StreetEasy Manhattan Condo Index shows us the overall Manhattan residential real estate market was essentially flat over this entire period (we noted that on Monday), loft #5D would need a slight adjustment for having its own small outdoor space, and #2B is much more like #2F because the second floor has much higher ceilings. (Gimme a break as we ignore the fact that #2B has much better light and an actual view, compared to #2F, as we are staying in Art-not-Science mode.) The $1,403/ft #2B comp implies that the interior of loft #2F was worth about $3.17mm. That, in turn, implies that someone just paid $180,000 for the “230 sq ft” terrace. On the edge of your seat yet?? That comes to $783/ft, or 56% of the value of in the interior. For a terrace that lacks a single plus-factor. (About that break you gave me: if we make a downward adjustment for the #2F value because #2B has that much better light and much better view, the #2F terrace becomes even more valuable.)
Did I mention that comping is hard? Or that outdoor space is something that (some) buyers will “over-pay” for ??
one final bit of Manhattan loft riffing before the holiday weekend
Our baseline for valuing the interior space of this 2007 era residential condo loft conversion in Tribeca was $1,403/ft, as above. That compares to the coop loft in the Greater New School University section of Greenwich Village that I hit yesterday that sold for $1,394/ft, also lacking a view and light. Of course, that ain’t right. No one would (should!) argue that Fifth Avenue at 13th Street is a more prime Manhattan loft micro-nabe than Worth Street and Broadway (neither is prime in its larger neighborhood), and everyone (everyone!) must acknowledge that condos carry a premium over coops.
Science takes another shovel to the head….